EMERGING MARKETS-LatAm equities advance as investors eye data; EU-Mercosur deal signed

By Twesha Dikshit and Ragini Mathur

Jan 9 (Reuters) - LatAm equities advanced on Friday and were set for solid weekly gains as investors kept a close eye on the situation in Venezuela while evaluating U.S. and domestic data for clues on the monetary policy path in both the United States and Brazil.

European Union states, meanwhile, gave the provisional go-ahead for the bloc to sign its largest ever free trade accord with South America's Mercosur, more than 25 years after negotiations first began.

Market moves this week have been driven by geopolitical tension, with Venezuelan bonds outperforming after the U.S. military capture of President Nicolas Maduro.

A key group of the South American nation's bondholders said they were ready to start debt restructuring talks once authorization for such discussions was granted.

U.S. President Donald Trump said he had canceled a second wave of attacks on Venezuela following cooperation from the nation.

Investors remained optimistic about Latin American assets at the start of a year that will see elections in Brazil, Peru and Colombia, with Trump's actions in the region potentially driving a shift to the right which in turn could lead to more market-friendly policies.

MSCI's Latin American equities index .MILA00000PUS rose 1%, and was on track for a weekly gain of almost 3%. A corresponding currency gauge .MILA00000CUS was muted but up almost 0.7% on the week.

DATA, RATE CUT PATH IN FOCUS

U.S. jobs growth slowed more than expected in December with businesses cautious about hiring, while the unemployment rate dipped to 4.4% leaving the door open for future Federal Reserve rate cuts.

Brazilian equities .BVSP added 0.6% and the real BRL= firmed 0.5% against the greenback. Data from Latin America's largest economy showed annual inflation slowed more than anticipated last year, solidifying expectations for monetary easing.

The central bank has held rates near a two-decade high of 15% citing inflationary concerns, but could come under renewed pressure to cut rates from President Lula da Silva following Friday's data.

"EM CPI should remain contained in Q1, but central banks are unlikely to rush into further dovish actions - with Brazil as a possible exception," Citi analysts said in a note.

Mexico's benchmark index .MXX was up 0.4% and the peso MXN= was flat. Official data showed industrial output rose 0.6% in November from the previous month.

Argentina's equities .MERV advanced 1.1% while the peso ARS=RASL weakened 0.3%. U.S. Treasury Secretary Scott Bessent said the nation had repaid the United States for a currency swap framework that helped stabilize the economy.

Key Latin American stock indexes and currencies at 1438 GMT:

(Reporting by Twesha Dikshit and Ragini Mathur; Editing by Kirsten Donovan)

((Twesha.Dikshit@thomsonreuters.com;))